Every year household debt gets a little bit bigger. Every year the UK national debt continues to rise.
We’re all borrowing from someone.
What will we do when the money runs out?
But can it, run out that is?
Money is a theoretical concept where we assign value to pieces of paper and coins and now numbers, so we can buy and sell and exchange services without having to cope with a vastly more complex bartering system.
Do any of us really understand where this money comes from? I’ve tried and it hurts my head to think about it!
In one theory of money creation, banks create money when people borrow. That money is then circulated, exchanged for goods and services and spread out.
In another theory, Kings and governments create money which they lend or give away in place of paying their debts.
However it happens, all money is created and only has whatever value people place on it.
Governments can always “print” more money. They’ve been doing it for the past decade with Quantitative Easing. The danger is that our perception of the value of money reduces the more of it there is. Hyper-inflation anyone?
In the UK we got a very practical demonstration of the ethereal nature of money after the BREXIT vote when the Pound plunged in value. Not because anything physical changed, just because worldwide perception of the future value of the UK economy lowered.
The real problem our economy faces is not that the money will run out, but that there will be a never ending supply, lowering our perception of money’s value and making what we thought we had worthless.
And that is one of the real dangers of debt. We keep borrowing until we’ve inadvertently created so much new money that even the money we don’t owe is worthless.
After every crisis and tragedy, people still carry on as before, heading out to work, making, creating, serving. Our economy is nothing without people who work. Whether or not BREXIT goes ahead, whoever wins the General Election next week, we, the people will continue to prove that our country still has economic value, that we are worth something, that we are creating something worth buying, services worth paying for.
When the money runs out, we will still be here. And if we need to, we can always create some more…